10 Undervalued Stocks for 2026 That Pass the Graham Test

Most "undervalued stocks" lists are just cheap stocks dressed up in fancy language. A P/E below 15? That's a starting point, not a conclusion. Benjamin Graham — the father of value investing and Warren Buffett's mentor — didn't pick stocks based on gut feel. He built a formula. And in 2026, that formula still works.

This article ranks the 10 best undervalued stocks for 2026 by their margin of safety against the Graham Number — the maximum price a disciplined value investor should pay for a stock based on its earnings and book value. We'll show you exactly how we screened, what the numbers say, and where the warnings are.

Disclaimer: This article is for educational and informational purposes only. Nothing here constitutes financial advice, a recommendation to buy or sell any security, or an offer of any kind. Always do your own research and consult a licensed financial advisor before making investment decisions. Past performance is not indicative of future results.

Why Most "Undervalued Stocks" Lists Miss the Point

There's a difference between a stock that's cheap and a stock that's undervalued. A stock trading at $5 can still be overpriced if the underlying business is worth $2. A stock at $100 can be a screaming bargain if the business is worth $200.

Graham understood this. His approach combined two pillars that most retail investors ignore:

Earnings power — Is the company actually making money? (EPS)
Asset backing — What's the company worth if the business stopped tomorrow? (Book Value Per Share)

Together, these two numbers form the Graham Number — a single figure that represents the upper bound of what a rational investor should pay. Any price below that number offers a margin of safety: a buffer that protects you if your analysis is slightly off, if earnings dip, or if the market stays irrational longer than you expect.

In a world of meme stocks, AI hype cycles, and 30x revenue multiples, stocks that trade at a genuine discount to intrinsic value are increasingly rare. But they exist — and in 2026, they're clustered in a sector most retail investors overlook.

How We Found These Undervalued Stocks for 2026

We screened over 4,000 U.S.-listed tickers using the following methodology:

The Graham Number Formula

The Graham Number is calculated as:

Graham Number = √(22.5 × EPS (TTM) × Book Value Per Share)

The constant 22.5 comes from Graham's own rules of thumb: no more than 15× earnings and no more than 1.5× book value — multiply those ceilings together and you get 22.5. The square root normalizes the result into a price.

Margin of Safety

Once we have the Graham Number, margin of safety is simple:

Margin of Safety = (Graham Number − Current Price) / Graham Number × 100

A stock trading at 60% below its Graham Number has a 60% margin of safety — meaning the business would have to deteriorate significantly before you've overpaid.

Additional Filters

The Graham Number alone can surface value traps — companies that are cheap for a reason. To filter those out, we also considered:

Piotroski F-Score signals — a 9-point scoring system that measures financial health across profitability, leverage, and operating efficiency. Stocks with low F-Scores were deprioritized regardless of their Graham Number gap.
Positive trailing EPS — negative earnings make the Graham Number mathematically undefined; we excluded all loss-making companies.
Reasonable beta — high-beta names (β > 1.5) were flagged as elevated risk, since volatility erodes the practical value of a margin of safety buffer.
Dividend sustainability — payout ratios above 100% were flagged for scrutiny (with one important exception explained below).

Why Financial Stocks Dominate the Undervalued Stocks 2026 Landscape

If you run a rigorous Graham screen today, you'll notice something immediately: the list is dominated by banks, insurers, and asset managers. This isn't a coincidence or a data glitch — it reflects structural market dynamics entering 2026:

Post-regional banking stress repricing — The 2023 regional bank crisis (SVB, Signature, First Republic) left lasting scars on investor sentiment toward the entire sector. Many well-capitalized regional banks have never fully recovered to pre-crisis valuations, even as their balance sheets are healthier than ever.
Insurance companies carry massive book values — Life insurers hold enormous investment portfolios. Their book value per share is high, which inflates the Graham Number and makes them appear deeply undervalued relative to market price.
Interest rate normalization benefits — Banks earn net interest income. After years of near-zero rates, normalized rates (4–5%) have restored the core profitability of traditional lending businesses.
Market rotation away from financials — Capital has chased AI, semiconductors, and growth tech. The opportunity cost of sitting in a regional bank has felt high — but that neglect is exactly what creates value.

The result: a concentration of legitimate, Graham-approved value in an unloved sector.

The 10 Undervalued Stocks for 2026: Margin of Safety Table

All data as of March 13, 2026. Graham Numbers calculated using trailing twelve-month EPS and most recent reported book value per share.

| Ticker | Company | Price | Graham Number | Margin of Safety | Yield | P/E | Risk | |--------|---------|-------|---------------|-----------------|-------|-----|------| | LNC | Lincoln National | $32.59 | $82.75 | 60.6% | 5.43% | 5.6× | Elevated | | CMCSA | Comcast | $30.16 | $57.10 | 47.2% | 4.32% | 5.6× | Low | | HTGC | Hercules Capital | $14.04 | $22.61 | 37.9% | 11.14% | 7.6× | Low | | ARCC | Ares Capital | $18.07 | $28.89 | 37.5% | 10.38% | 9.7× | Low | | PRU | Prudential Financial | $92.34 | $144.76 | 36.2% | 5.69% | 9.2× | Moderate | | HBAN | Huntington Bancshares | $15.48 | $20.76 | 25.4% | 3.96% | 11.1× | Moderate | | RF | Regions Financial | $25.32 | $32.48 | 22.0% | 3.93% | 11.0× | Moderate | | C | Citigroup | $105.50 | $131.53 | 19.8% | 2.12% | 15.1× | Moderate | | CFG | Citizens Financial | $56.94 | $69.98 | 18.6% | 2.94% | 14.8× | Moderate | | KEY | KeyCorp | $19.22 | $23.55 | 18.4% | 4.17% | 12.6× | Moderate |

Stock-by-Stock Breakdown

1. Lincoln National (LNC) — 60.6% Margin of Safety

Lincoln National leads the list with a gap between price and Graham Number that would have made Graham himself do a double-take. At $32.59, it trades at less than 40 cents on the Graham dollar. The life insurer carries an EPS of $5.83 and book value per share of $52.20, producing a Graham Number of $82.75.

LNC's 5.43% yield with a 30.9% payout ratio means the dividend looks well-covered. The elevated beta (1.29) is worth noting — this is not a boring, slow-moving stock. Lincoln has navigated significant restructuring over the past two years, and the market hasn't fully forgiven it yet. That's the opportunity. Risk label: elevated.

2. Comcast (CMCSA) — 47.2% Margin of Safety

The second-largest cable company in the world, trading at 5.6× earnings. Comcast's core cable and broadband business generates consistent cash flow, and the stock's decline from its highs reflects cord-cutting fears that have been priced in for years. At $30.16 against a Graham Number of $57.10, the market is pricing in a business deterioration that hasn't shown up in earnings yet.

CMCSA has low beta (0.78), a 4.32% yield, and a razor-thin 18.4% payout ratio — one of the most conservative dividend structures on this list. This is the rare case of a mega-cap with genuine Graham-test undervaluation. Risk label: low.

3. Hercules Capital (HTGC) — 37.9% Margin of Safety ⚠️

Hercules Capital is a Business Development Company (BDC) — a specialized structure that lends to venture-backed and growth-stage companies. At $14.04 versus a Graham Number of $22.61, it offers a 37.9% margin of safety and an 11.14% yield.

⚠️ Payout ratio warning: HTGC's payout ratio is 101.6%. This looks alarming but is largely by design — BDCs are required by law to distribute at least 90% of taxable income to shareholders to maintain their pass-through tax status. The high payout isn't a sign of dividend stress; it's the business model. That said, there is minimal room for error. If portfolio company performance deteriorates, the distribution could be trimmed. The dividend has not been recently cut. Risk label: low (beta 0.82).

4. Ares Capital (ARCC) — 37.5% Margin of Safety ⚠️

The largest publicly traded BDC in the U.S., Ares Capital is a blue-chip name in alternative credit. Its $18.07 price versus a $28.89 Graham Number represents a 37.5% margin of safety. The 10.38% yield makes it one of the highest-income plays on this list.

⚠️ Payout ratio warning: Like HTGC, ARCC's 103.2% payout ratio reflects its BDC structure, not dividend distress. Ares has maintained or grown its dividend consistently over more than a decade. The dividend has not been recently cut. ARCC's scale ($12.9B market cap) and diversified lending book make it more resilient than smaller BDC peers. Risk label: low (beta 0.63).

5. Prudential Financial (PRU) — 36.2% Margin of Safety

One of the largest U.S. life insurers, Prudential trades at $92.34 against a Graham Number of $144.76. The company's $93.23 book value per share nearly matches its stock price — meaning you're essentially buying the balance sheet for free and getting the earnings engine at no cost.

PRU's 5.69% yield with a 54% payout ratio represents a sustainable, income-generating position. Beta of 0.97 means it roughly tracks the broader market. For investors wanting large-cap insurance exposure without LNC's volatility, Prudential offers a cleaner risk profile. Risk label: moderate.

6. Huntington Bancshares (HBAN) — 25.4% Margin of Safety

Huntington is a $31B regional bank with a straightforward lending business across the Midwest. At $15.48 versus a Graham Number of $20.76, it passes the test with room to spare. The 3.96% yield and 44.6% payout ratio make this one of the most balanced income/value combinations on the list.

HBAN's beta sits at 0.97 — essentially market-rate risk with below-market valuation. For conservative value investors who want banking exposure without Big Four complexity, Huntington is worth a hard look. Risk label: moderate.

7. Regions Financial (RF) — 22.0% Margin of Safety

Regions Financial covers the Southeast and Midwest with a traditional commercial banking model. The $25.32 price sits comfortably below the $32.48 Graham Number. Earnings of $2.30 per share and book value of $20.39 per share drive a solid Graham test pass.

The 3.93% yield and 44.8% payout ratio mirror Huntington's conservative structure. Regions has been quietly building capital and improving efficiency ratios — the kind of unglamorous work that eventually gets rewarded by the market. Risk label: moderate.

8. Citigroup (C) — 19.8% Margin of Safety

Citi is the most complex name on this list — a global bank in the middle of a multiyear transformation under CEO Jane Fraser. At $105.50 versus a Graham Number of $131.53, it trades at roughly 80 cents on the Graham dollar. Book value per share of $110.01 actually exceeds the current stock price — a rarity for a bank of this size.

Citi's 2.12% yield is the lowest on the list, reflecting a more growth-oriented capital allocation strategy. Beta of 1.13 and a "moderate" risk label reflect the execution risk embedded in the turnaround story. But for patient value investors, buying a global bank below book value with a 20% margin of safety is a position Graham would recognize. Risk label: moderate.

9. Citizens Financial Group (CFG) — 18.6% Margin of Safety

Citizens is a mid-sized regional bank with $56.94 trading against a Graham Number of $69.98. EPS of $3.86 and book value per share of $56.39 produce a well-supported valuation. The 2.94% yield and 44.6% payout ratio are consistent with the conservative payout culture running through most of this list's bank names.

CFG has been expanding its private banking and wealth management capabilities — diversifying away from pure lending, which tends to get re-rated over time. Risk label: moderate.

10. KeyCorp (KEY) — 18.4% Margin of Safety

KeyCorp rounds out the list with an 18.4% margin of safety at $19.22 versus a Graham Number of $23.55. The Cleveland-based regional bank offers a 4.17% yield and a manageable 53.9% payout ratio. EPS of $1.52 and book value of $16.22 produce a clean Graham Number calculation with no unusual adjustments needed.

Key's partial stake sale to Scotiabank in 2024 improved its capital ratios, and the bank has been rebuilding profitability metrics. It's the most modest margin of safety on the list, but still a genuine pass. Risk label: moderate.

A Note on Dividend Safety Across the List

None of the 10 stocks on this list have recently cut their dividend — a clean sweep. The two names with payout ratios above 100% (HTGC and ARCC) are BDCs operating under a legal framework that mandates high distributions. For the eight conventional stocks, payout ratios range from 18.4% (CMCSA) to 54% (PRU and KEY), representing broadly sustainable dividend structures even if earnings soften modestly.

The highest-risk dividend scenario is HTGC and ARCC if their underlying loan portfolios experience meaningful credit losses — worth monitoring quarterly.

Run Your Own Graham Screen

The 10 stocks above were identified using the same methodology powering the Graham Number screener at valueofstock.com/screener. You can:

Enter any ticker and instantly see its Graham Number vs. current price
Screen the full market for stocks with margin of safety above any threshold you set
Filter by sector, beta, dividend yield, and Piotroski F-Score
Track changes in Graham Number as new earnings are reported

The best value investors don't rely on lists. They build repeatable processes. The Graham calculator is that process — applied to real-time data, available free.

→ Find your own undervalued stocks for 2026 at valueofstock.com/screener

Disclaimer: The information presented in this article is for educational purposes only and does not constitute financial advice, investment advice, trading advice, or any other kind of advice. ValueOfStock.com does not recommend that any security discussed herein should be bought, sold, or held by any particular investor. All investors should conduct their own independent research, consider their individual risk tolerance and investment objectives, and consult with a qualified financial professional before making any investment decision. Stock prices and financial data change rapidly; figures cited in this article reflect data as of March 13, 2026, and may no longer be accurate. Investing in stocks involves risk, including the possible loss of principal.